Shilp Gravures Limited :513709 : A fundamentally strong undervalued company in packaging industry: Buy at CMP Rs 73 one year Target price Rs 120

About Company: Shilp Gravures Limited is Ahmadabad based public limited company, incorporated in the year 1993 under the provisions of the Companies Act, 1956. Its shares are listed on the Bombay Stock Exchange since 1995. The Company has set up, the first gravure roller manufacturing house in India. The Company is engaged in engraving of rollers using three different engraving technologies i.e. electronic, laser and chemical etching. The engraved rollers are using in printing and packaging industries.

The Company has a subsidiary company Re-Shilp Equipments India Private Limited (“Re-Shilp”), a company incorporated under the provisions of Companies Act, 1956. Re-Shilp is engaged in the business of manufacturing of automation equipment for indian paper, film and foil converting industries.

The Company has entered into a Joint Venture Agreement with three Companies namely, Hannecard N.V., Mitex GMBH and Unimark International Private Limited to incorporate a Joint Venture Company in the name of HMSU Rollers (India) Private Limited on 1st February, 2012. The said Joint Venture Company is engaged in the manufacturing of Rubber Rollers and Poly Urethene Rollers. The Company has commenced its commercial operations with effect from 18th April, 2013.

Financials Of Company:

	2016-E	2015	2014	2013	2012	2011
Revenue	63	57.32	53.93	54.54	55.88	50.53
Other Income	1.5	0.87	0.46	0.29	0.18	0.24
Total Income	64.5	58.2	54.39	54.83	56.06	50.77
Expenditure	-47	-43.66	-39.34	-39.12	-40.88	-37.48
Interest	-1.9	-2.15	-2.25	-1.87	-2.01	-2.31
PBDT	15.6	12.39	12.8	13.84	13.18	10.98
Depreciation	-6.4	-6.24	-6.46	-6.22	-5.79	-6.32
PBT	9.2	6.15	6.34	7.62	7.38	4.66
Tax	-3	-1.61	-2.11	-2.13	-2.12	-1.32
Net Profit	6.2	4.54	4.23	5.49	5.27	3.34
Equity	6.15	6.15	6.15	6.15	6.15	6.15
EPS	10	7.38	6.88	8.93	8.57	5.43
CEPS		17.53	17.39	19.04	17.99	15.7
OPM %		25.36	27.9	28.81	27.17	26.31
NPM %	10	7.92	7.84	10.07	9.43	6.6
Dividend	15%	12%	12%	15%	15%	12.50%

Positives:

1. 23 year old company catering to printing and packaging industry.
2. Consistent profit making and dividend payment record n last 5 years.
3. Diversified into new business couple of years back should help to increase growth rate in future.
4. Book value as on 31-3-2015 Rs 73 available at price/book value(P/BV) of 1.
5. The proposed new guidelines of printing for packaging industry could bring flurry of new orders as each manufacturer/packer would require to redesign the laminate as per the new guidelines which could be highly favorable and positive trigger for the stock.
6. Estimated EPS for year 2015-16 is Rs 10 and stock is available at CMP of Rs 73 at forward PE multiple of 7.3.

Shilp is available at CMP Of Rs 73 long term investor can safely invest in this fundamentally sound and undervalued scrip for 1 year target of Rs 120.

Result update 30-4-2016: Shilp has sold off there stake in one subsidiary and joint venture HMSU rollers and booked loss of Rs 2.68 crores in this quarter hence the net profit has fallen down  though operating profit has increased by 30% but due to negative impact of loss arising out of sale of investment has resulted in decrease in NP on standalone basis.This could affect the stock price in short term investor should hold on to fresh investment and wait for the uptrend to resume fundamentals of company remains intact and long term investor can start accumulating at lower levels.Consolidated net profit reportedly increased to 5.53 crores resulting in increase of EPS to 8.98 from 6.16 .

Revised recommendation :Hold